FOREX-Dollar up against yen, quarter-end trade dominates

Fri Jun 28, 2013 9:18am EDT

Related Topics

* Dollar up versus yen, dips against the euro
    * Fed's Dudley, Powell played down stimulus tapering plan
    * Investors square positions on last trading day of quarter


    NEW YORK, June 28 (Reuters) - The dollar rose against the
yen but fell against the euro on Friday, as investors squared
positions on the last trading day of the quarter and the month.
    For the month, the dollar fell 1.4 percent against the yen,
snapping eight straight months of gains against the Japanese
currency, while the euro rose 0.5 percent against the dollar. 
    But the medium-term outlook remained in favor of the dollar,
 with investors increasingly pricing in the chance that the U.S.
Federal Reserve will begin to downsize its asset purchase
program, perhaps as early as September.
    Federal Reserve Governor Jeremy Stein said on Friday the Fed
must consider the overall economic improvements since it
launched the stimulus and not give undue weight to the most
recent economic data as it considers scaling back asset
purchases.. That prompted a minor pull-back in
the dollar but did not alter the day's trading trend. 
    "For the most part, there is overall improvement in risk
appetite as the general direction of U.S. monetary policy is
keeping demand for the dollar intact," said Kathy Lien, managing
director at BK Asset Management.
    Against the yen the dollar was up 0.6 percent on
Friday at 98.94 yen. 
    The dollar index, which tracks the greenback's performance
against other major currencies, was down marginally at 82.797
, though not far off Thursday's 83.171, a peak last
reached on June 3. The index was on track for its second
straight week of gains but lost 0.4 percent on the month.
    The dollar lost ground against the euro, after 
Federal Reserve officials on Thursday sought to play down
expectations that the central bank was about to cut back its
stimulus programme.  
    The euro was up 0.5 percent at $1.3095, with stop-loss sell
orders cited at $1.3020. 
    "Today is dominated by quarter-end flows and one should not
be reading too much into the price moves," said Chris Walker,
currency strategist at Barclays. Large funds rebalance their
investment portfolios at the end of the month and the quarter, 
and their flows and requirements to square positions often
dominate trade on the last trading day. 
    "The dollar's uptrend remains intact going into next quarter
as we are expecting Fed tapering to start in September. We
forecast euro/dollar to fall to $1.26 in six months and the
dollar to rise to 103 yen in the next three months," Walker
added.
    Deutsche Bank said in a note that a recent drop in euro zone
government yields was likely to weigh on the euro. 
    Yields on euro zone bonds, like those on German Bunds, had
risen with U.S. Treasuries, but they have started to fall this
week after several European Central Bank officials said monetary
policy will remain accommodative.
    "This (rise in yields) is now reversing, and so rate
differentials which were providing support for the
euro are longer doing so," Deutsche strategists said.
    Analysts said growing worries about the euro zone's
faltering economy, in contrast to the relative optimism around
the U.S. economy, could hurt the single currency.
    This week European Central Bank President Mario Draghi
pointed out downside risks to growth and said the ECB was
nowhere near exiting its accommodative monetary policy.
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